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Company settles federal reverse-mortgage fraud case

A Tampa, Florida-based mortgage banking company has agreed to pay $29.6 million to settle federal accusations that it illegally collected interest and fees from the government’s reverse mortgage insurance program.   

Walter Investment Management Corp., which owns the nationwide servicers RMS and Green Tree Servicing, was accused by the U.S. Department of Justice of defrauding the Department of Housing and Urban Development’s Home Equity Conversion Mortgages (HECM) program, which insures almost all reverse mortgages in the U.S.

According to the DOJ, the company made false claims to collect debenture interest between August 2009 through March of this year.   

DOJ said the company failed to conduct required appraisals within 30 days to establish the market value of homes and help the government determine whether to foreclose on certain properties or enter into workout plans. Under the reverse mortgage program, services are required to meet HUD deadlines and requirements if they are to be reimbursed for any losses on loans.

Walter Investment was also accused of collecting illegal referral fees between July 2010 and October 2014 that were reimbursed by HUD when the homes were sold in foreclosure. 

“This settlement represents a significant milestone in our office’s long-standing campaign against mortgage fraud,” said U.S. Attorney A. Lee Bentley III, in a DOJ news release. “HUD’s lending programs are vital to the economic well-being of some our district’s most vulnerable residents and we are committed to holding servicers and lenders to the high standards required by these programs.” 

In settling the case, Walter Investment admitted no wrongdoing.   

"We believe this resolution is in the best interest of the company and our shareholders and are pleased to have resolved these claims," said Mark J. O'Brien, chairman and chief executive officer of Walter Investment, in a prepared statement.  "As a leading franchise in the reverse mortgage sector, RMS is fully committed to, and strongly supportive of, the HECM program and the benefits it provides to its customers."

The allegations were first raised by former RMS executive Matthew McDonald, DOJ said. He will receive $5.15 million under federal whistleblower legislation, as his share of the recovery in this case.


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